The Lender’s Equations: How Much Mortgage will you Qualify for?

GDS and TDS debt service ratios.

Knowing how much you can reasonably, comfortably and responsibly contribute to home ownership is paramount in your making a wise and sound investment on your Canadian property. The big four factors that generally contribute to this mortgage amount are:

  1. Monthly income generated
  2. The amount you can contribute to your down payment
  3. The mortgage interest rates and term you qualify for
  4. Other financial commitments or debts you are obliged to pay

Lenders basically use two rules to determine the mortgage you are eligible to be funded to receive, in addition to examining your credit history and FICO score:

  1. Gross Debt Service Ratio (GDS)
  2. Total Debt Service Ratio (TDS)

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Happy Home Hunting Tips for Canadians

Home hunting tips

Finding the right home for you and your loved ones really comes down to three chief factors:

  1. Affordability: Does the home fit into your budget? Have you determined the financing you can qualify for through a mortgage pre-approval? Have you factored in mortgage insurance, utilities and heating expenses, association fees and taxes?
  2. Lifestyle: Is the home located in an area within the proximity of the amenities you and your family require? Is the lot large enough for your pet(s)? Will owning this home impede you from doing the things you love doing? Are you close enough to work, family and friends?
  3. Future Needs: Are kids a possibility in the future? Is the home large enough for a family? Is the basement developed? Are there schools nearby? Or, if you are close to retirement, is the home too large? Are there too many stairs and floors in the home to negotiate?

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Building the Right Team at Mortgage Time

Choose professionals for your mortgage. The Mortgage Group.

Your mortgage is one of the largest purchase items you will probably take on in your life. In making that commitment, you will most likely seek advice from several people: your family, your partner, your real estate agent, your financial planner and your mortgage broker.

Ensuring that you employ the best real estate professionals that you have access to – home buying professionals with your best interest in mind – will save you exponentially down the line. It takes a solid team to secure an optimal home.

Finding a well-connected Canadian mortgage broker is your first step. A mortgage broker will help you ascertain the true amount you can afford to spend on your new home, before you start shopping. A mortgage pre-approval will give you powerful buying power with home sellers, and will hold for you the best mortgage rates available, usually within 90 days. With one mortgage application, a mortgage broker will scout the Canadian mortgage market for you, and find the mortgage product that best suits your needs, be it through a bank, trust company, credit union, insurance company or private lender.

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Saving for a Down Payment

down payment minimum

Mortgage Down Payment

Today’s mortgage market allows potential homeowners to purchase their dream property in Canada with as little as five per cent down.

Any down payment that totals less than 20 per cent of the property value will require mortgage default insurance, and is considered to be a high ratio loan.

A conventional mortgage is defined as a mortgage loan where 80 per cent or less of the property value is financed through a lender. The percentage of your home value that is financed, or not paid for by the down payment, is defined in a Loan to Value ratio (LTV) (loan amount divided by property value). The LTV has a large influence on the mortgage product you will be eligible to qualify for on the purchase of your new property.

The greater the down payment you can accumulate, the greater the contribution you are making toward the principal value of your home, and thus the less of the mortgage loan amount you will be paying interest on over time.
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Don’t be Afraid to Talk to a Mortgage Broker

Find super low rates

Halloween aside, this October has plenty of reasons to get you spooked, what with a recession, a long and tiring election campaign, and recent world events. Plenty of reasons, but your mortgage need not be one of them.

We’re here to help in this frightful time, no matter if you’re buying a home, renewing your mortgage, or looking to refinance.

Mortgage brokers have access to a wide range of lenders and products, and we can find a mortgage that’s right for you. After all everyone’s mortgage needs are different. You may require the certainty that your mortgage payment will stay the same from the first day of your term to your last. You may want flexibility, to be able to pull equity out of your home to finance a renovation or a new car. Regardless, you should be able to do so with the lowest mortgage rate available in Canada.

Mortgage rates are incredibly low right now, but you likely wouldn’t know it if you looked at your local bank’s rates. Go with your bank’s mortgage rates, you’ll probably end up paying a ghastly premium.

Over Half of Canadian Retirees Are in Debt, but That Doesn’t Have to Include You

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A recent poll done by CIBC and Harris/Decima has found that 59% of Canadian retirees are still in debt. Worse yet, the poll finds that 55% of people that carry debt into retirement have seen their debt levels either increase or remain unchanged over the past year.

As you can imagine, it only becomes more difficult to repay your debt once you have lost the bulk of your income due to retirement. So it stands to reason that every effort should be made to repay your debt before retirement, right? Easier said than done, of course, but it is possible. The earlier you start paying down your debt the better, but there are options, even if you are on the cusp of retirement. Continue reading

Flaherty Tightens Canadian Mortgage Rules.

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In a statement Thursday, Finance Minister Jim Flaherty announced a number of new mortgage lending rules. Come July 9th, the CMHC will no longer insure mortgages with amortizations longer than 25 years, and will further limit the amount a homeowner can refinance their mortgage to 80%, down from 85%.

The Harper government has now reduced the maximum amortization three times. In 2008, they reduced the maximum amortization from 40 to 35 years, and in 2011 they reduced it again to 30 years. In July, it will be decreased once more to 25 years, eliminating the last vestiges of the extended amortizations introduced by the CMHC in 2006.
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How to Compost

Make your Backyard Greener

Composting is an easy, inexpensive way to ensure your planting soil is getting the nutrients it needs. Compost and leave and grass mulches improve soil texture, prevent erosion, better hold moisture and encourage healthy plant growth. A healthy yard often means a healthy home – less opportunities for water to seep in through the foundation or stagnate in areas where it could lead to rot.

How to compost is simple. Your local municipality or town site should provide compost bins for a subsidized fee – about $35 for a new bin. If not, they will be available at most home hardware shops or you may locate a gently used one on a sell site such as kijiji. Alternatively, you may wish to craft your own Continue reading

Calgarians Rank City Housing C+, Neighbourhoods B-

Recent Survey Finds Vast Majority of Calgarians are Happy – and Satisfied with Financial Well Being

The Calgary Foundation released its 2011 Vital Signs this week, an ‘annual community checkup that measures the vitality of the community, identifies significant trends, and assigns grades in 12 areas critical to quality of life.’

According to the 2011 report, Calgarians graded most issues the same or as slightly improved over last year. Safety, arts and culture, learning, and work all received B grades; citizen engagement, health and wellness, financial well being and neighbourhoods B-; getting around took a C; and housing, aging population and environmental sustainability garnered a C+.

Despite these rather average grades, an overwhelming 91% of participants described themselves as happy Continue reading

Four Year Fixed Rates Down 40 Basis Points

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As of Monday the best mortgage rate available on a four-year term came down 0.40% to dip under prime rate and station at 2.99%. This was the first mortgage rate change to be seen at CanEquity since the second week of September, wherein the best variable rate available rose 0.20%, while the two-year fixed rate, the three-year fixed rate and the five-year fixed rate saw declines of 10 to 50 basis points (0.10-0.50%).

A qualified mortgage broker can help you deduce if the financing you are requesting to attain is indeed fitted to your budget.

The next interest rate announcement will be made by the Bank of Canada on October 25, and on October 26 the fall Monetary Policy Report will be issued.